Thai sugar output seen down 7pc y/y, price lowest in decade

BANGKOK: Thailand is expected to produce around 13 million tonnes of sugar in the upcoming growing season, down 7% from a year earlier, the country's cane and sugar body said on Tuesday.

Scant rainfall and decreased acreage in the world's second-largest sugar exporter would cut cane output in the 2019/20 season, which begins around November, by around 8% to 120 million tonnes, said Warawan Chitaroon, secretary-general of the Office of Cane and Sugar Board.

"Cane and sugar output will be lower than the last season because of an expected drought. But the numbers could improve if there is abundant rainfall," she told Reuters.

"There is also less acreage now, as low prices in the past years have turned farmers away from planting cane."

Thailand produced 130.9 million tonnes of cane in the production year 2018/19, or 14 million tonnes of refined sugar.

An initial cane price, which farmers would be paid when they sell canes to millers, was also expected to be lower than 700 baht ($22.73) per tonne come the next season, the lowest in more than a decade, further making cane a less attractive crop for farmers.

The initial price is calculated based on an expected income from exports, converted from U.S. dollar into Thai baht, and is made official just before the new season starts in November.

The baht is Asia's best performing currency this year and is trading at its strongest in more than six years against the U.S. dollar. A strong domestic currency means lower returns from exports.

"A price like this is no incentive for farmers and will make them turn to other crops. There is a tendency that (cane and sugar) output will be lower each year," said Boonthin Kotsiri, a director at the cane and sugar body.

The Thai authorities' prediction is in line with a U.S. Department of Agriculture report in April, which expected cane and sugar output to fall, citing reduced sugarcane acreage as farmers turn to more profitable crops.

Thailand consumes about 2.5 million tonnes of its sugar production domestically and exports the remainder.

India, the world's top consumer and second-largest producer of sugar, also expected its sugar output to fall 18% in 2019/20, hit by last year's drought and this year's delayed arrival of monsoon rains.

However, India's sugar inventories are still expected grow.